Rental affordability is deteriorating in parts of England.
The research by rental platform Rentd looked at the current average income of a tenant and how it compared to the average level of rental affordability based on the benchmark of two and half times the average rent.
The research shows that the average annual income for a rental tenant in England is currently £28,116 – that’s 12 per cent below the wider average.
As a rule of thumb, tenants should work to a rental affordability ratio of earning 2.5 times their rent in order to live comfortably. However, this is also a gauge that many letting agents will use when deciding if you are eligible to rent a property.
The average rent bill in England is £968 per month, or £11,616 per year.
This means a tenant needs to earn £29,041 per year for their home to be truly affordable. This is, however, £925 more than a tenant’s average annual income.
In fact, as many as five regions are home to tenant earnings that come in some way below the rental affordability ratio of 2.5 times income.
In London, the average tenant earns £39,585 a year but with annual rent costing an average of £21,084, this means they’re coming in -£13,125 below the affordability threshold.
In the South East, they’re falling £4,531 short; in the South West, it’s £4,046; in the North West it’s £2,985; and in the East, affordability is missed by £1,471.
However, four regions do offer a great chance of rental affordability.
In the North East, where the average annual rent cost is £6,996, a tenant would ideally earn £17,490 a year in order to live comfortably. In fact, the average tenant income for the regions is £25,878, £8,388 above the affordability threshold. This makes the North East the most affordable region in England.
In the East Midlands, the average tenant has an income £4,878 above the threshold; in Yorkshire & Humber, average income is £3,978 above the threshold; and in the West Midlands, income is £1,740 above the threshold.
“Rental affordability has been a burning topic for quite some time and unfortunately, it still remains a serious issue in today’s rental market. More and more of us are remaining reliant on the rental market until far later in life and this means more tenants fighting it out for a limited supply of rental homes” says Rentd founder Ahmed Gamal.
“Rather than tackle this issue head on and look to increase rental stock supply, the government has actually looked to reduce the number of landlords operating within the sector via a number of changes such as tax relief and an increase in stamp duty on buy-to-let homes.
“They’ve done so in order to increase supply to an overheated housing market to gloss over the fact that they simply haven’t built enough houses, leaving the nation’s tenants out in the cold as a result.
“At the same time, wage growth simply hasn’t kept pace with the wider cost of renting and living and this has only helped increase the issue of affordability within the rental sector.”
Rental Demand Exceeds Supply Continues To Dominate The Market
The great imbalance between tenant demand and available stock continues, according to the latest market snapshot from ARLA Propertymark.
In February, Propertymark members reported that an average letting agent branch had 142 applicants registered on their books. This is a record high for the month of February and year on year a 73 per cent increase from February 2021 when agents recorded 82 applicants per branch.
This figure has been on an upwards trend since April 2017.
Of these applicants, an average of 78 were newly registered in the last month.
Agents in the South West of England reported the highest demand with an average of 195 applicants per branch, closely followed by the North East of England where agents reported an average of 184.
In February, Propertymark members reported that an average branch had just five properties available to rent.
Agents in the North West of England and East Midlands reported the lowest stock at an average of just two per branch with Wales close behind with an average of only three.
Propertymark chief executive Nathan Emerson comments: “There are many factors affecting the private rented sector which are impacting stock levels. Whilst in terms of rising rent prices it appears to be a good time to be an investor, once other factors are included yields can be much lower.
“Many landlords have struggled under the increasing legislative and financial pressures they are facing. As we await the Renter’s Reform White Paper it is clear more changes are on the way and it’s vital that the private rented sector is valued to avoid unintended consequences.”